Best Small Business Loan Providers

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In today’s video we are going to continue our series on how to get paid, with a look at which are the best short loan providers for small business. So let’s get started!

Check the resources link in our main article here:

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Best Small Business Loan Providers

  1. 1. Best small business Loan Providers by FitSmallBusiness.com
  2. 2. Does your business need a loan for 6 months to a year? Small businesses used to have one main avenue for shortterm funding, merchant cash advances. Today, there are several much cheaper alternatives.
  3. 3. Best Short-Short Term Loan Provider To Small Business Loans: On Deck Capital •Friendly toward brick and mortar businesses. •Approximately half the cost of a traditional merchant cash advance. •Company must have 1 year of history, over $100,00 in annual revenues, and be US based.
  4. 4. Best Provider Of Shortterm loans To Online Businesses: Kabbage • Perfect for the 1 or 2 person eBay, Amazon, or Etsy merchant. • Approximately half the cost of traditional merchant cash advances.
  5. 5. Cheapest source of funds to small business: Paypal •This option is by far the cheapest but . . . •The amount of available capital is tiny and requires your company receive lots of payments via paypal. Working Capital
  6. 6. One Deck Capital Kabbage Online Type of Business Value of Loans / Merchant Cash Advance Online & Offline $5,000 - $250,000 (Typically, $30k $35K) (merchants that collect via PayPal or shell via eBay, Amazon or Etsy) $500 $50,000 PayPal Working Capital Online Merchant Cash Advance (generic) Online & Offline (merchants that collect via PayPal) (must receive payments by credit cards $1 K - $20K Up to 150% of an average month’s credit card receipts Maximum 8% of your annual paypal sales.
  7. 7. One Deck Capital Length of Loan Origination Fee / Fee Deducted From Funds 3 month to 18 month (typically 6 months 2% ( come of its competitors like IOU central charge 4.95%) Kabbage 6 months PayPal Working Capital 3 - 11 months depending on your payment plan Merchant Cash Advance (generic) Typically 6 - 12 moths 5 - 10 % fee None None (Origination, Risk Assessment, or Professional Service Fee)
  8. 8. One Deck Capital Cost of Funds Typically, 15% of the amount borrowed for a six month loan Kabbage 8 - 24 % of the amount being borrowed PayPal Working Capital 3 - 10% of the amount borrowed, the shorter repayment = lower rate Merchant Cash Advance (generic) 25 - 60% of the amount being borrowed
  9. 9. PayPal Merchant Cash Advance (generic) One Deck Capital Kabbage Working Capital Collection Process Deduct fixed amount from bank account on daily basis 6 monthly payments with the first two being a greater amount A fixed percentage from 10-30% of funds deposited into you PayPal account A fixed percentage of credit card receipts, often in the range of 10-25% Personal Guarantee Yes, the positive is you build your credit score. No No No
  10. 10. Personal guarantee: Loans vs. cash advances
  11. 11. On Deck Capital is the only provider of loans. Kabbage and Paypal Working Capital are providing a “new and improved” merchant cash advance. A loan has both benefits and drawbacks compared to merchant cash advances. The main drawback is that On Deck Capital requires that the borrower personally guarantee the loan.
  12. 12. If the business goes under, you are personally on the line to pay it back. If you take a merchant cash advance, generally speaking, you’re not pledging your personal finances to pay it back. The good side of a loan is that paying it back can help improve the credit rating of your business and lead to greater access to capital at lower rates.
  13. 13. Versus interest rate
  14. 14. We have talked about the amount that the borrower will need to pay back over the time of the loan. In the case of both On Deck Capital and Kabbage, a typical borrower can expect to pay back the principal (amount borrowed) + 15% of the amount borrowed. Based on these numbers, taking $100,000 will end up costing $115,000.
  15. 15. However, the interest rate is not 15%. In fact, the effective annual interest on these loans is around 60%! There are two main reasons why there is such a large difference between the amount paid back and the effective annual interest rate.
  16. 16. 1. The period for repayment in this example is six months, and not a year. 2. The borrower is paying back the principal throughout the term of the loan / merchant cash advance. In other words, if you average out the amount owed during the life of loan its about half of the original amount taken.
  17. 17. And Finally...
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